Davis-Bacon Act

The Davis-Bacon Act (formally the “Davis-Bacon and Related Acts and Reorganization Plan No. 14 of 1950) was introduced to ensure corporations working on federal contracts met a specific employment standard regarding wages, benefits, employee classification and more. This might seem intimidating for companies looking to work for the federal government, but with the right help and planning, it doesn’t have to be.

According to the Department of Labor, “typical compliance issues” consist of misclassification workers (leading to incorrect wages), not paying full wages, incomplete/inaccurate record keeping (not counting all hours worked), not maintaining employee documents (apprentice documents), not submitting certified payroll, and not posting the required Davis-Bacon poster and applicable wage determination documents at the work site. If a compliance issue happens, the federal government has the right (under the act) to withhold contract payments to satisfy the underpaid wages, terminate the contract, and possibly fine the company for “liability for any resulting costs to the government.”

If company administration is already being handled properly and their wages are close to or at the federal level, learning and implementing the standards and procedures shouldn’t add a tremendous amount of overhead. The problem arises when companies are paying at a lower wage than the federal standard. This is especially relevant in non-union companies because the federal “prevailing wage” aligns closely with union wages. Because of this, some have criticized the act stating it gives “large union shops an inherent advantage over small entrepreneurial start-ups.”

The Davis-Bacon Act is something every company has to contend with if they plan on working for the federal government in any capacity. It may one day be overturned or replaced with something else, but until then we can help you successfully navigate the process.